Accountant not aware of letter requesting inclusion of €372,000 in Lowry company accounts

Kevin Burke, who worked as an accountant with BBT accounts from July 2001 to May 2007, told Remy Farrell SC, prosecuting at Dublin Circuit Criminal Court, that he audited the books of Garuda Ltd in 2007 and visited their offices in January 2007 for that purpose.

He completed the audit in May 2007.

The witness was referred to a letter signed by Michael Lowry on a Streamline Enterprises letterhead.

The jury had previously been told that Streamline Enterprises is the trading name of Garuda Ltd..

The letter was dated January 15, 2007 and addressed to Neale O'Hanlon, who, Mr Burke confirmed, was the partner in charge of Garuda's audit within BBT.

The letter said: “I wish to advise that I issued an invoice to Norpe OY in respect of monies outstanding for commission due to Garuda Ltd. up to the end of 2006 to the value of €372,000. I obtained payment directly to myself of this amount.

As this is money properly due to the company please ensure that it is returned and reflected in the accounts with tax paid and set against my director's loan.”

The jury heard previously that Garuda Ltd. acted as an agent for a Finnish refrigeration company, Norpe OY and as such were entitled to 5% commission on Irish sales.

It is the State's case that Mr Lowry's company received Stg £248,624 in commission from Norpe OY, a refrigeration company based in Finland, in August 2002.

It is alleged that Mr Lowry arranged for this payment to be made to a third party, residing in the Isle of Man, and therefore it didn't appear in the company accounts for that year, nor did he declare it as income.

It is further alleged that the accounts were then falsified in 2007 to reflect that the payment was received in 2006.

Mr Burke said he didn't recall the letter and said Mr O'Hanlon never brought it to his attention but agreed that both he and Mr O'Hanlon were present at an audit team meeting for Garuda in January 30, 2007.

He was then referred to a “Prepayments Lead Schedule” dated February 16, 2007 which Mr Burke explained was a summary of the items that make up payments that covered a period of time that go beyond the accounting year.

He said the schedule allows for such payments to be accounted for in an appropriate way.

Mr Burke agreed that he had handwritten this schedule.

He said a transaction entitled “installation invoices” had recorded a figure of €372,000 which was not included by him and said it was not his hand writing.

He agreed that he also didn't instruct the inclusion of that figure.

Mr Burke accepted a suggestion from counsel “It would seem to follow that when you prepared the lead schedule you had recorded a nil entry for installation invoices and at some stage thereafter €372,000 is recorded there”.

He also agreed that a total balance recorded at the bottom of the page had not been entirely written by him.

The total was written as €439,941 but Mr Burke said the first three digits were not written by him.

He further agreed with counsel that it seems the total recorded by him, before the addition of the €372,000 figure, was €67,941.

Mr Burke was then referred to a journal entry which recorded a prepayment of €372,000 and sales of €372,000 for the year ended December 31, 2006.

He said the impact of this journal entry was to increase the sales of the year by €372,000 and said the entry “doesn't ring a bell” with him, telling the jury this was not his handwriting.

Mr Burke said he believed the handwriting was Neale O'Hanlon's.

Counsel asked Mr Burke if he had become aware of the January letter what steps he would have taken when auditing the accounts.

“I would have looked for a back up for it, such as an invoice,” the witness replied.

“If you don't have a backup, where does that leave you?” Mr Farrell asked.

“I would have raised it as a query,” Mr Burke said before he agreed that this was not included in a list of queries he had raised before signing off on the audit.

When asked by counsel if he ever been told “orally” about this transaction, Mr Burke said he had not and agreed that he conducted the audit without ever have been made aware of this €372,000.

Patrick Treacy SC, defending Garuda Ltd, informed the witness that his client was being prosecuted under Section 202 of the Company's Act of 1990, in that it failed to keep proper books of accounts within the meaning of the Act, insofar as the books of account did not correctly record and explain the transactions of the company.

Counsel told Mr Burke that his client's defence is that it believed it was abiding by company law in that it had employed “a competent and reliable person” to ensure that its books of account were in order.

Mr Burke agreed that when he audited the company, he was a qualified chartered accountant and accepted that the firm he worked for was competent enough to conduct the audit.

Mr Burke agreed with Mr Farrell in re-examination that it was not an auditor's role to keep a proper set of books for the company, rather it was the role of an auditor to inspect those books and express a view as to whether they were a true and accurate reflection of the state of that company.

Mr Lowry (64) of Glenreigh, Holycross, Co. Tipperary, has pleaded not guilty at Dublin Circuit Criminal Court to four charges of filing incorrect tax returns on dates between August 2002 and August 2007 in relation to a sum of Stg £248,624 received by his company, Garuda Ltd and one charge in relation to failing to keep a proper set of accounts on dates between 28 August, 2002 and August 3, 2007.

He further pleaded not guilty on behalf of Garuda Ltd to three similar charges in relation to the company's tax affairs and one charge of failing to keep a proper set of accounts on the same dates.

The trial continues before Judge Martin Nolan and jury of eight men and four women.